In sales, there’s a well-known cliché that states, “It costs five times more to acquire a new customer than it does to retain one,” and while that number may fluctuate depending on the industry you’re in, retaining customers is indeed easier than finding new ones.
In the Harvard Business Review, one study even showed that increasing customer retention by only 5 percent will increase profit margin by 25 to 95 percent. This means if you have 20 customers and retain one extra customer, you’ll see a profit increase of 25 to 90 percent.
So why aren’t more businesses focused on retaining clients, and how do you keep your customers happy? Try implementing these three strategies to your business.
1. Turn feedback into action.
Every customer response is an opportunity to grow not only customer satisfaction but your business. Yes, it’s crucial to provide customers with a survey that examines why you could or could not retain their business; however, it could be argued that it’s more critical to implement changes from that feedback. Positive reviews show what to strengthen, while negative reviews reveal what can be improved upon from a fresh perspective. Not taking advantage of suggestions made by customers is a missed opportunity.
2. Practice the golden rule.
The quickest fix to improve customer satisfaction and retention rates is to remember that customers are human. Whether this means going the extra mile to help someone or taking ownership of an issue, imagining yourself as the customer increases your empathy and likelihood of solving their problem; treating others as you’d like to be treated is always a dependable model for business.
3. Make data-driven decisions.
The most critical step to improving customer relations is implementing a customer relationship management (CRM) system. CRMs provide business owners and managers with a central place to study customer behaviors and interactions, helping them make the most effective decisions to retain and keep customers happy. Being able to identify key performance indicators and act on information is quite the art form; luckily, the best CRMs provide several types of analytics:
- Prescriptive Analytics show data that focuses on answering specific issues and points to the next best steps for your business.
- Predictive Analytics use previous data and patterns to forecast what might happen next. For customer retention, this would be churn risk, renewal risk, and next-best offer analysis.
- Descriptive/Diagnostic Analytics allows you to study market and data trends by providing summary statistics and prior history reports.
- Outcome Analytics enable you to best study what your customers do by pointing to what behaviors lead to specific outcomes. Acting on outcome analytics will allow you to make the necessary changes to bolster your customers’ experience throughout different parts of interacting with your business.
Customer retention is the key to success
If you have a loyal customer in front of you whom you’ve done business with before, and there’s a greater chance for repeat business with them, why chase a new prospect? Even if you convert a new customer, will you start the process all over again after you do business with them? That’s inefficient.
Increasing customer retention and satisfaction is as simple as listening to your customers, being kind and making intelligent, informed decisions.